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Outlook and appraisal [June 2012]

Ashcroft, Brian (2012) Outlook and appraisal [June 2012]. Fraser of Allander Economic Commentary, 36 (1). pp. 4-23. ISSN 2046-5378

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Abstract

Growth in the Scottish economy appears to be weakening again after some survey evidence of a pickup in the first quarter of the year. GDP fell slightly in the final quarter of last year and could fall again in the first quarter, despite survey evidence, if the Scottish economy continues to track the UK. The recovery from the Great Recession of 2008 - 2009 remains weak with Scottish GDP still just under 4% below its pre- recession peak and employment 3% below. The UK figures are -4.3% and -1%. The recovery of Scottish GDP relative to the UK is also being overstated by the effect of falling oil and gas production. When oil and gas production is removed from the data the Scottish recovery is relatively weaker than previously thought with UK ex oil and gas GDP -3.5% below its pre-recession peak while the Scottish figure is -3.6%. It is now clear that the recovery in output stalled after mid-2010. We are strongly of the belief that the UK government fiscal austerity programme is the main culprit, with the added effects of the impact on business confidence of the developing problems in the Eurozone and the impact of rising commodity price driven inflation on real incomes and consumption.